Rating Action: Moody’s affirms Skillsoft’s B2 CFR and first lien debt rating; outlook changed to positiveGlobal Credit Research – 17 Mar 2022New York, March 17, 2022 — Moody’s Investors Service (“Moody’s”) affirms Skillsoft Finance II, Inc. (“Skillsoft”) B2 corporate family rating (CFR), B2-PD probability of default rating, and the B2 rating on the company’s senior secured term loan. The speculative grade liquidity rating of SGL-2 is unchanged. Concurrently, Moody’s assigned a B2 rating to the company’s proposed $160 million incremental first lien senior secured term loan. The rating outlook is changed to positive from stable.Proceeds from the proposed incremental term loan along approximately $217 of Skillsoft stock and $60 million of balance sheet cash will be used to fund the acquisition of Codecademy, a prosumer provider of technical e-learning.The change of outlook to positive reflects the recent improvement in performance and Moody’s expectations for solid organic revenue growth and improved profitability. Despite the modest increase in leverage as a result of the acquisition, Moody’s expect leverage to trend towards 4.5x and free cash flow to gross debt to grow to above 10% over the next 12-18 months as restructuring and one time charges wind down.RATINGS RATIONALEThe B2 CFR reflects Skillsoft’s relatively high pro forma debt to EBITDA at closing of the acquisition (over 5x based on trailing October 31, 2021 results excluding certain one-time expenses and over 8x including those expenses). Skillsoft’s credit profile benefits from the company’s leading position in the e- learning industry, a growing base of fairly predictable revenues from contracts, the increasing adoption of Percipio, Skillsoft’s proprietary content delivery platform and a highly diversified customer base consisting of enterprise and small to medium sized business.Skillsoft’s credit profile also reflects the highly competitive, fragmented nature of the human capital management (HCM) and enterprise e-learning markets, which has low barriers to entry and a large selection of free content. The rating also considers the execution risk associated with the integration of multiple recent acquisitions, as well as ongoing business turnaround efforts after years of revenue declines. While Moody’s expects the company will focus on de-leveraging, the company is acquisitive which could delay de-leveraging efforts.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSSkillsoft’s ratings could be upgraded if the company maintains organic revenue growth and leverage is sustained below 4.5x.Skillsoft’s ratings could be downgraded if performance deteriorates or if free cash flow generation declines such that liquidity is materially weakened. Ratings could also face downward pressure if leverage were expected to be sustained over 6x on other than a temporary basis.Skillsoft’s SGL-2 rating is supported by cash of $81 million as of October 31, 2021 and expectations for healthy free cash flow generation over the next 12 months. The company’s unrated $75 million accounts receivable line is expected to be fully drawn at closing (approximately $11 million drawn as of October 31, 2021).Skillsoft’s ultimate parent is a public company with a semi-independent board of directors. Moody’s expects the company to maintain moderate financial policies balancing the interests of shareholders and creditors, as demonstrated by the Codecademy acquisition which was funded with a combination of debt, cash on hand and equity.As a software company, Skillsoft’s exposure to environmental risk is considered low. Social risks are considered low to moderate, in line with the software sector. Broadly, the main credit risks stemming from social issues are linked to data security, diversity in the workforce and access to highly skilled workers.The following ratings were affected:Affirmations:..Issuer: Skillsoft Finance II, Inc….. Corporate Family Rating, Affirmed B2…. Probability of Default Rating, Affirmed B2-PD….Gtd Senior Secured 1st Lien Term Loan, Affirmed B2 (LGD4) from (LGD3)Assignments:..Issuer: Skillsoft Finance II, Inc…..Incremental Gtd Senior Secured 1st Lien Term Loan B, Assigned B2 (LGD4)Outlook Actions:..Issuer: Skillsoft Finance II, Inc…..Outlook, Changed To Positive From StableSkillsoft Finance II, Inc. is the debt issuing subsidiary of Skillsoft Corp. which provides cloud-based e-learning, in person training, learning management and human capital management software solutions for enterprises, government, and education customers through its Skillsoft, SumTotal and Global Knowledge businesses. The company generated an estimated $698 million of pro forma revenue in the fiscal year ended January 2022. Skillsoft is headquartered in Nashua, New Hampshire.The principal methodology used in these ratings was Software Industry published in August 2018 and available at Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. 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Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Matthew B. Jones VP – Senior Credit Officer Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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